ANZ reduces savings and term deposit interest rates

ANZ reduces savings and term deposit interest rates

ANZ has shaved rates on some of its savings and term deposit accounts, as savers continue to feel the pinch from low interest rates.

Term deposit holders are likely to be hit harder, with bigger interest rate cuts made to the big four bank’s term deposit accounts than its savings accounts.

ANZ trimmed 15 basis points off two of its main savings accounts: the ANZ Progress Saver and the ANZ Online Saver.

The new maximum rate for the ANZ Progress Saver is 0.70 per cent, while for the ANZ Online Saver, it is 0.65 per cent.

ANZ Progress Saver

  Old rate New rate Difference
Max rate 0.85% 0.70% 0.15%
Base rate 0.01% 0.01% 0%

Note: To qualify for the maximum rate you need to make at least one single deposit of $10 or more in a month.

ANZ Online Saver

  Old rate New rate Difference
Max rate (including intro rate for 3 mths) 0.80% 0.65% -0.15%
Ongoing rate 0.05% 0.05% 0%

The bank also reduced its interest rates by up to 25 basis points on two of its term deposit accounts.

The ANZ Advance Notice Term Deposit has been slashed by between five and 25 basis points. 

The biggest cuts were made to the product’s three-month term option, now with an interest rate of 0.40 per cent.

On the ANZ Term Deposit, rates were lowered by up to 10 basis points. 

Parking money in this product’s 24- to 48-month term options have a return of 0.35 per cent, while the 60-month term deposit offers a 0.45 per cent rate.

Savings and term deposit rates plummet

ANZ’s changes, effective today, bring the average ongoing savings rate to 0.51 per cent, according to the RateCity database.

As mortgage rates continue to fall, banks continue to take an axe to their savings and term deposit rates.

While the highest ongoing savings rate six months ago was 2 per cent, today that has dropped to 1.60 per cent.

Contributing to this fall, 67, including all of the big four, have reduced its savings rates in the past two months by an average of 17 basis points.

And it’s not just savings account holders who are suffering. Savers locking away their funds in a term deposit are also seeing their returns slashed.

More than 80 banks have cut its term deposit rates in the past two months, with an average reduction of 12 basis points.

Big four banks chip away at rates for savers

About three quarters of household deposits are with a big four bank, according to the Australian Prudential Regulation Authority.

The big four banks have been chipping away at their main savings accounts over the past six months through a series of small cuts. 

Savers holding a standard savings account with a major bank are earning an ongoing rate of as low as 0.05 per cent, while big four customers with a conditional based savings account can earn up to 0.90 per cent.

The one exception is Westpac, which is offering a max rate of 3 per cent to Australians aged between 18 and 29 years of age. 

On average, the four major banks have lowered its savings rates by almost 10 basis points in the past two months, RateCity records showed.

Westpac Group shaved its savings rates in early September by up to 20 basis points across its subsidiaries, including St. George, BankSA, Bank of Melbourne and RAMS. 

More recently, Commonwealth Bank trimmed savings rates across its Youthsaver and Netbank Saver accounts by five basis points. 

All of the big four banks also lowered its term deposit rates in the past two months, by an average of close to 10 basis points.

Big 4 conditional savers over the last 6 months

  April 14th- max rate Today – max rate Difference
CBA

0.50%

0.50%

0%

Westpac

1.30%

0.85%

0.45%

NAB

1.25%

0.80%

0.45%

ANZ

1.00%

0.70%

0.30%

Source: RateCity. Notes: based on a balance of $50K. Does not include accounts with age restrictions. Westpac offers a max rate of 3% to people aged 18 - 29 years old.

Highest ongoing savings rates

Bank 13 Oct 2020 max rate
Up

1.60%

ME Bank

1.55%

Australian Unity

1.50%

ING

1.50%

MyState Bank

1.50%

Bank of Queensland

1.50%

Source: RateCity. Note: Accurate as of October 13, 2020.

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Learn more about savings accounts

What is the interest rate on savings accounts?

As banks frequently change their rates, the most accurate way to look at interest rates on savings accounts is to use a savings accounts comparison tool. When you look at the savings rate check what the maximum and minimum rates are. Often banks will offer you a promotional rate for the first few months which is competitive, but then revert back to a base rate which can sometimes be less than inflation. Ongoing bonus rates are often a safer bet as they will keep rewarding you with the maximum rate, provided you meet their criteria

What are the two types of NAB locked savings accounts?

With a locked savings account in NAB, you can earn bonus interest and learn financial discipline. NAB offers two types of locked savings accounts, each with their own terms and conditions.

The NAB Reward Saver account pays a variable base interest rate of 0.05 per cent per annum and a bonus interest of 0.55 per cent. You’re eligible for the bonus if you make a minimum of one deposit on or before the second last banking day and have no withdrawals in the month.

Meanwhile, the NAB iSaver account provides 0.05 per cent as the standard base interest rate and a fixed bonus margin of 0.55 per cent during the first four months from the date of opening the account. You can park your cash in the account and enjoy unlimited monthly transfers between linked daily bank accounts without impacting the interest rate.

Who has the highest interest rates for savings accounts?

As banks frequently change their rates, the most accurate way to know who currently has the highest interest rate is to use a savings account comparison tool.

What is an ANZ locked savings account?

An ANZ locked savings account locks your money and prevents you from spending. You may use a standard savings account as the account where your salary is deposited. You can then withdraw funds when needed, but aren’t able to make purchases with it. However, this account may not grow much as the continual withdrawing of funds will limit the interest you can earn.

With a locked savings account in ANZ, you know your savings will grow because you can’t access the money. You can also qualify for a bonus when you deposit at least $10 per month and don’t make any withdrawals. To help you with this further you can set up an automatic transfer from your regular ANZ savings or transaction account so you don’t forget to make a monthly deposit.

Your ANZ locked savings account offers you a base interest rate of 0.1 per cent per annum plus an additional bonus interest of 0.49 per cent per year. The interest is calculated daily and credited to your account on the last working day of the month.

What is a good interest rate for a savings account?

A good rule of thumb to keep in mind with savings accounts is to look for a rate that is higher than the CPI inflation rate. This number is constantly changing, so check the Reserve Bank of Australia’s page. If you aren’t earning interest above this then the value of your money will go backwards over time.

Can you have multiple ING savings accounts?

Yes, you can open up to nine accounts with ING at any particular time. If you’re saving money for various goals, such as buying a car or taking a holiday, you can name each of your multiple ING savings accounts differently.

To get a Savings Maximiser account, you’ll need to deposit more than $1000 every month and make at least five additional purchases. If you also want to grow your savings, from 1st March 2021, you can earn up to 1.35 per cent per annum variable interest on one account with a balance of up to $100,000 when you also maintain an Orange Everyday account.

With ING, multiple savings accounts can help keep track of all your savings goals. All the accounts offer flexible withdrawals where you can withdraw as low or as high as you want without impacting your earning interest rate. However, you can only earn the bonus interest on one account. To apply for a Savings Maximiser account, you can visit ingdirect.com.au.

What is a Westpac locked savings account?

The Westpac locked savings account (also known as "Westpac Life") can help customers reach savings goals faster through bonus interest. Customers receive 0.2 per cent standard base interest with a variable bonus rate of 0.35 per cent when the closing balance at the end of the month is higher than the opening balance.

There are some conditions to earn the bonus interest on Westpac's locked savings account, though. First, you’ll need to increase the balance each month either through a deposit or not making any withdrawals, and then link it to a Westpac Choice account and make at least five eligible payments using your debit card. Please consult your bank as to what an eligible payment is. 

How to make money with a savings account?

Savings accounts make you money by earning interest on your savings. The more money you deposit, the longer you leave it in the account, and the higher the account’s interest rate, the more interest you’ll be paid by the bank or financial institution, and the more your wealth will grow.

To make sure your savings account makes money and doesn’t lose money, it’s important to maintain a large enough minimum balance that the annual interest earned exceeds any annual fees charged on the account.

Can you set up a savings account online?

Yes. Several large and small banks offer online applications for savings accounts, and there are also online-only financial institutions to consider.

Online-only savings accounts are often less expensive than other savings accounts, though they may not offer the same flexibility, features, or face-to-face service as more traditional savings accounts.

How does interest work on savings accounts?

The type of interest savings accounts accrues is called compound interest. Compound interest is interest paid on the initial deposit amount, as well as the accumulated interest on money you have. This is different from simple interest where interest is paid at the end of a specified term. Compound interest allows you to earn interest on interest at a higher frequency. 

Example: John deposits $10,000 into a savings account with an interest rate of 5 per cent that he leaves untouched for 10 years. At the end of the first year he will have $10,512 in savings. After ten years, he will have saved $16,470.

What is a savings account?

A savings account is a type of bank account in which you earn interest on the money you deposit. This makes it one of the easiest and safest investment tools.

Can you have a joint savings account?

Yes. Joint savings accounts can be useful for two or more people wanting to combine their savings to meet shared financial goals, including spouses, flatmates and business partners.

Some joint savings accounts require all parties to sign before they can access the money. While less convenient, this extra security can help encourage all parties to meet their shared financial goals.

Other joint savings accounts allow any of the account holders to access the money. These accounts can be convenient for financially responsible couples that trust one another implicitly. 

How to open a savings account for my child?

Some banks and financial institutions allow parents to open a bank account for their child as soon as it is born, and start depositing funds to go towards the child’s future.

Children’s savings accounts generally don’t have fees, and are structured to help develop positive financial habits by limiting withdrawals, encouraging regular deposits, and earning interest on the savings, similarly to standard savings accounts.

Can you set up direct debits from a savings account?

It’s not usually possible to set up a direct debit from your savings account to cover ongoing expenses or bills, as savings accounts are structured around growing your wealth by earning interest on regular deposits, and discouraging withdrawals.

Some transaction accounts allow you to set up direct debits and also earn interest, though you may not enjoy as much flexibility as a dedicated transaction account, or get as high an interest rate as a dedicated savings account.